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SMARTFINANCIAL INC. (SMBK)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered strong operating performance: operating EPS of $0.86 (vs. $0.69 in Q2 and $0.54 in Q3’24) and “total operating revenue” of $50.8M; GAAP diluted EPS was $0.81 . Against S&P Global consensus, SMBK posted a major EPS beat and a slight revenue miss in Q3; beats also occurred in Q1 and Q2 on EPS.*
  • Net interest income rose to $42.4M (+$2.1M q/q) while the tax-equivalent NIM compressed 4 bps to 3.25% due to timing of the new sub debt and higher new deposit pricing; management guides Q4 NIM to 3.30–3.35% and expects 5–7 bps quarterly NIM expansion in 2026 .
  • Balance sheet growth was robust: loans +$98M (10% annualized q/q) and deposits +$179M (15% annualized q/q), with liquidity ~21% of assets and plans to retire $111M of brokered deposits in Q4 at 4.28% .
  • Strategic actions: $4.0M pre-tax gain on sale of SBK Insurance offset a $3.9M pre-tax loss from an $85M securities repositioning; $100M sub debt issuance supports capital and growth while retiring $40M legacy sub debt .
  • Dividend was maintained at $0.08 per share, payable December 2, 2025 .

What Went Well and What Went Wrong

What Went Well

  • “Sixth consecutive quarter of positive operating leverage” and “hit our $50 million quarterly revenue target in Q3” ahead of schedule, with operating EPS $0.86 and tangible book value per share rising to $26.00; management highlighted strong pipelines and deposit momentum .
  • Deposits grew $179M (15% annualized q/q), enabling $104M brokered deposit paydown and supporting liquidity (~21% of assets); Q4 plan to retire another $111M of brokered deposits at 4.28% .
  • Capital strengthened: total consolidated risk-based capital ratio rose to 13.3% (from 11.1%); tangible common equity/tangible assets improved to 7.78% .

What Went Wrong

  • NIM compressed 4 bps q/q to 3.25% due to timing (new sub debt before retirement of old) and higher deposit production cost; cost of total deposits increased to 2.44% (+5 bps q/q) .
  • Noninterest income fell $261K q/q to $8.64M, as the $3.9M securities loss and reduced insurance commissions (post sale) offset the $3.96M SBKI gain .
  • Credit metrics ticked modestly higher: nonperforming loans/leases rose to 0.24% (from 0.19% in Q2), and nonperforming assets/total assets to 0.22% (from 0.19%); allowance/loans eased to 0.93% (from 0.96%) .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Operating Revenue ($USD Millions)$46.8 $49.2 $50.8
Net Interest Income ($USD Millions)$38.24 $40.34 $42.43
Total Noninterest Income ($USD Millions)$8.60 $8.90 $8.64
Diluted EPS (GAAP) ($)$0.67 $0.69 $0.81
Operating EPS ($)$0.67 $0.69 $0.86
Margins & EfficiencyQ1 2025Q2 2025Q3 2025
NIM (tax-equivalent)3.21% 3.29% 3.25%
Yield on Loans (FTE)5.97% 6.07% 6.14%
Cost of Interest-Bearing Deposits2.92% 2.95% 2.98%
Cost of Total Deposits2.37% 2.39% 2.44%
Efficiency Ratio (GAAP)68.96% 66.14% 66.32%
Credit & CapitalQ1 2025Q2 2025Q3 2025
ACL / Loans0.96% 0.96% 0.93%
NPLs / Loans0.20% 0.19% 0.24%
NPAs / Assets0.19% 0.19% 0.22%
Net Charge-offs (annualized)0.01% 0.01% 0.10%
Tangible Book Value / Share ($)$23.61 $24.42 $26.00
Loan Composition ($USD Millions)Q1 2025Q2 2025Q3 2025
CRE – Non-owner Occupied$1,117.4 $1,114.1 $1,136.1
CRE – Owner Occupied$885.4 $958.99 $1,012.1
Consumer Real Estate$784.6 $803.27 $811.2
Construction & Land Dev.$357.4 $391.16 $390.7
Commercial & Industrial$768.5 $778.75 $794.8
Leases$64.21 $62.50 $60.30
Consumer & Other$14.76 $15.27 $17.31
Total Loans & Leases$3,992.2 $4,124.1 $4,222.4
Balance Sheet Totals ($USD Millions)Q1 2025Q2 2025Q3 2025
Deposits$4,808.7 $4,872.1 $5,050.9
Total Assets$5,411.2 $5,490.9 $5,785.0
Equity$505.9 $519.1 $538.5
Loan-to-Deposit Ratio (%)83% 85% 84%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM (tax-equivalent)Q3 20253.30–3.35% (guided in Q2) 3.25% actual Missed vs guidance due to timing/Deposit cost
NIM (tax-equivalent)Q4 2025—3.30–3.35% New guidance (raised vs Q3 actual)
NIM expansionFY 2026—+5–7 bps per quarter New longer-term trajectory
Noninterest IncomeQ3 2025~$9M $8.64M actual Slightly below guidance
Noninterest IncomeQ4 2025—~$7M (post SBKI sale) Lower run-rate post-sale
Noninterest ExpenseQ3 2025$33.8–$34.0M $33.87M actual In range
Noninterest ExpenseQ4 2025—$32.5–$33.0M Tightened lower band
Salaries & BenefitsQ4 2025—$19.0–$19.5M New guidance
Brokered Deposits PaydownQ4 2025—~$111M @ 4.28% Deleveraging funding
Deposit Beta (variable/total)Forward—Target ~40–45%; ~32% directly indexed Clarified
DividendsPeriodPreviousCurrentChange
Quarterly DividendQ4 2025$0.08 (Q2 board action) $0.08 payable Dec 2, 2025 Maintained

Earnings Call Themes & Trends

TopicQ1 2025 (Prior-2)Q2 2025 (Prior-1)Q3 2025 (Current)Trend
AI/Technology InitiativesFocused platform investments; stable tech spend, reallocation Containment of opex; systems optimization Using bots, Copilot; risk/fraud tools; renegotiated core/data processing/interchange; client UX focus Increasing adoption and efficiency orientation
Deposits & Funding+$122M deposits; L/D 83%; deposit costs down q/q Seasonal outflows; non-broker net +$14M; L/D ~85%; new production cost ~3.24% +$179M deposits; brokered paydown $104M; plan $111M more; variable beta target 40–45% Improving mix and cost trajectory
Margin OutlookGuide Q2 NIM ~3.25% Guide Q3 NIM 3.30–3.35% Guide Q4 NIM 3.30–3.35%; 2026 +5–7 bps/quarter Constructive, accelerating in 2026
Tariffs/MacroMonitoring tariff exposure; client feedback constructive Credit stable; stress-testing renewals Liability sensitivity; demonstrated pass-through on variable deposits; early signs benefiting from cuts Neutral-to-positive positioning
Mortgage/Investment ServicesMortgage team growth; fee guidance $8–$8.5M Stronger than expected insurance & mortgage revenues Mortgage “as good a year” as ever; investment services momentum; treasury mgmt annuity growth Expanding fee engines post SBKI sale
Credit & ConcentrationsACL 0.96%; NPAs 0.19% ACL steady; NPAs 0.19%; NCOs 0.01% CRE concentration down to 271% from 301% via equity downstreaming; NPAs 0.22% Stable credit, improved concentration metrics
Talent & MarketsAdded 5 revenue producers; organic deepening strategy 10 adds in H1; targeting high-opportunity MSAs Selective expansion; Alabama/TN/FL momentum; “Always be recruiting” Ongoing lift-outs in core footprint

Management Commentary

  • “We hit our $50 million quarterly revenue target in Q3… I remain very bullish on our outlook.” – Billy Carroll, CEO .
  • “Our net interest margin experienced temporary compression… We’re projecting our fourth quarter margin to be in the 3.3% to 3.35% range.” – Ron Gorczynski, CFO .
  • “We utilized the gain from the sale of our insurance operations to offset losses associated with selling $85 million of securities… reinvested in securities yielding 4.95%.” – CFO .
  • “Tangible book value per common share rose to $26… operating efficiency ratio improved to 64%.” – Management .
  • “We believe we are one of the Southeast’s brightest stories… outstanding markets, strong experienced bankers.” – CEO .

Q&A Highlights

  • Deposit Beta and Indexing: “We have about 32% directly indexed, and ~45% variable overall… targeting ~40% beta.” – CFO .
  • Brokered Deposits: From $268M (June) to $164M (September), plan to pay down ~$111M next quarter and aim to eliminate over time .
  • Margin Trajectory: Expect +5–7 bps per quarter NIM expansion in 2026; Q4 2025 at 3.30–3.35% .
  • Technology/AI Spend: Bots/Copilot deployed to enhance efficiency and client experience without materially lifting opex; reinvestment enabled by vendor renegotiations .
  • M&A Stance: Organic growth is “1A”; open to “needle-moving” strategic opportunities that make SMBK better, not just bigger .

Estimates Context

MetricQ1 2025 ConsensusQ1 ActualQ2 2025 ConsensusQ2 ActualQ3 2025 ConsensusQ3 Actual
Primary EPS Consensus Mean ($)0.547*0.67*0.642*0.69*0.722*0.86*
Revenue Consensus Mean ($)46.225M*45.856M*48.480M*46.830M*51.060M*50.840M*
  • Q3 EPS: Beat (0.86 vs 0.72) – significant. Q3 Revenue: slight miss (50.84M vs 51.06M). Q1/Q2 EPS also beat; Q1/Q2 revenue slightly missed.*
  • Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Operating leverage story intact: sustained EPS growth, rising TBV/share, and efficiency ratio improvement position SMBK for continued re-rating .
  • Near-term margin recovery: Q4 NIM guided to 3.30–3.35% with structural tailwinds (brokered paydowns, higher securities yields, deposit beta leverage) and expected 2026 quarterly NIM expansion of 5–7 bps .
  • Funding mix improving: strong core deposit inflows and targeted reduction of higher-cost brokered balances support spread and ROA/ROE progression .
  • Fee durability post SBKI: despite lower insurance commissions, mortgage banking, investment services, and treasury management provide diversified fee growth channels .
  • Credit quality remains sound with manageable upticks; CRE concentration reduced via capital downstreaming—provision normalized to $227K in Q3 .
  • Strategic capital actions (sub debt issuance, securities repositioning) have strengthened the balance sheet while preserving book value trajectory .
  • Dividend maintained ($0.08), reinforcing capital discipline and shareholder returns amid growth investments .

Bolded catalysts for stock reaction: clear EPS beat vs consensus in Q3*, improving NIM guidance with 2026 expansion targets, and visible funding cost relief via brokered deposit reduction .

Notes:
* Values retrieved from S&P Global.